a study on hpws

8/10/2019 A study on hpws

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H i g h P e r f o r m a n c e W o r k S y s t e m s

E x c i t i n g D i s c o v e r y o r P a s s i n g F a d ?

Arup Varm a, Institute of Hum an Resources Industrial Relations, Loyola University, Chicago; Richard W . Beatty, School of

Manage ment Labor Relations, Rutgers University; Craig E. Schneier, Craig Eric Schneier Associates; David 0 . Ulrich,

University of Michigan

R

ecently, several organizations

reported implementing high

performance work systems,

with remarkable success. These

HPWSs, as they are becoming known

(as defined by Nadler, 1989), are

primarily aimed at improving

the organ ization s financial

and operational performance.

A survey of 39 organizations

was conducted to examine the

antecedents, the design, and the

overall effectiveness of these

initiatives. Results indicate that

HPW Ss that create a change in

the organization s cultural

behavior (e.g., cooperation,

innovation) and people management

practices (e.g., reward and selection

systems) can positively impact the

financial and operational performance

of these organizations.

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Introduction

During the last few years, many organizations

have shown an increa.sing interest in designing

and implementing high performance work systems

(HPWSs) in order to improve organizational

performance and productivity. While HPWS

may be the latest buzzword or fad, it is not very

clear what defines HPWSs, and how they are

designed and implemented. This article reports

an empirical study undertaken to investigate how

organizations are defining HPW Ss and the extent

of implementation success.

The primary role of an H PWS is to help the

organization achieve a fit between information,

technology, people, and work (Hanna. 1988;

Nadler & Tushman, 1988). In this

connection, Huber and Glick (1993)

have argued that organization design

is the sum total of the organization's

technologies, processes, and struc-

tures, and the fit is between these

categories and the external environ-

ment. This fit is considered essential

to respond to customer requirements

and environmental dictates, thus

keeping the organization competitive

and financially successful (Tushman

and Nadler. 1978; Brown. 1989:

Nadler, 1989). In essence, organizations have

realized that the four major pieces of organiza-

tional architecture (i.e., information, technology,

people, and work) need to be highly integrated

for maximum efficiency and effectiveness.

Nadler and Gerstein (1992) have characterized

an HPWS as a way of thinking about organiza-

tions. Thus, instead of trying to fit people (the

employees) into the existing technological struc-

ture within the organization, HPWSs aim to find

the best fit among the four components. This fit

leads to optimal utilization of all resources, while

the emphasis shifts from internal efficiency and

effectiveness to external efficiency and effective-

ness, with a constant eye on the customer, and

other environmental requirements.

HPWSs are getting to be known by many

different names (Neal & Tromley, 1995), such

as high-involvement work systems, flexible

work systems, high commitment/involvement

work systems, etc. However, the basic premise

of all these versions remains the same creat-

ing an internal environment that supports

customer needs and expectations. This internal

environment is typically comprised of two broad

The primary role

of an H PW S is to

help the organiza-

tion achieve a fit

between informa-

tion,technology,

people, and work.

sub-environments the social and the technical

and it is the optimum fit between the two that

is the primary goal of H PW Ss. White (1994), for

example, characterizes an HPWS workplace as

one that has self-managed teams that design

their own work methods, have high levels of

training, and share in financial results. The

emphasis is on a horizontal organization with a

strong customer orientation. In addition, some-

thing common to nearly all HPWS success stories

is the renewed exam ination of work the estab-

lishment of what needs to be done (if at all), and

doing it better, faster, and with lower costs.

The literature is replete with examples of

success stories (see bibliography HRPS, 1996).

^ ^ ^ ^ ^ ^ F o r ex am p le , R am ch arand as (19 94 )

discusses the example of Xerox,

which has recovered from a down-

ward spiral in the 1980s when it

was beginning to lose market share

and seeing earnings steadily decreas-

ing to a situation in which it has

recaptured markets from the Japanese

and earnings have been on a steady

upward path. This remarkable turn-

around was achieved by creating

a continuous learning environment

and moving from a vertical, control-

oriented hierarchy to a horizontal, empow ered

organization. In this connection, it has been

argued that employee involvement is a key ingre-

dient of high performance organization design

(Cotton, 1993; Law ler, 1994; Ledford, 1994).

One of the keys to successful HPW S imple-

mentation seems to be the way an organization

uses its human resources. In a survey of 700

organizations (U.S. Dept. of Labor, 1993), it

was found that firms that used innovative human

resource practices show a significantly higher

level of shareholder and gross return on capital.

Further, among Fortune 1000 companies that

empowered their employees by increasing

responsibility, a vast majority reported increased

productivity and quahty. Thus, it is evident that

the primaiy emphasis of HPW Ss is on modifying

internal processes (i.e., work, information, people,

and technical structures) that are aimed at satisfy-

ing customer needs and expectations.

A majority of the organizations that have

implemented HPWSs reported meeting with

remai'kable financial and organizational success

in their efforts. Specifically, research has estab-

lished that the use of comprehensive systems of

work practices is highly correlated with higher

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productivity and stronger financial performance

(U.S. Dept. of Labor, 1993). Further, Huselid

(1995) reports a strong link between high perfor-

mance work systems mostly human resource

systems in this instance and decreased turnover,

as well as increased productivity. However, in spite

of the significant positive impact of HPWSs, only

about 13 of American companies have actually

implemented HPWSs (White, 1994), and even

then, there is little research on the impact of

HPWSs in the service sector.

The urvey

The present study was thus designed to assess

the effectiveness of initiatives undertaken to

develop what have come to be known as high

performance work systems, specifically in ser-

vices. The focus of our study was on organizations

that produce goods and services, but primarily

upon the service component in the sense of pro-

viding support to those who ultimately deliver the

product or service. For purposes of this study, we

adapted the definition provided by Nadler and his

colleagues (1992). According to this definition,

HPWSs are characterized as self-contained work

units that have, over time, met the ultimate com-

petitive test of consistently providing significant

value to the customer due to the unique struc-

tures and processes that provide efficiency and

effectiveness.

In order to design and develop a comprehensive

questionnaire, we conducted a pilot study using a

limited number of firms in New Jersey. Once the

survey questionnaire was finalized, we set about

identifying organizations that would be contacted

with a request to participate in this study. Over

1,500 organizations were contacted. These orga-

nizations were identified from several sources,

including the annotated bibliography (HRPS.

1996), which was based on an exhaustive litera-

ture search. In addition, we contacted nearly all

the members of The Human Resource Planning

Society (n = approx.1.200 .The survey was sent

to the over 1,500 organizations thus identified. The

initial mailings were succeeded by a follow-up call

to each company, w here the relevant individual(s)

were contacted with a request to participate in

the study by experiencing a rather lengthy tele-

phone interview and forwarding us firm-specific

data. Thirty-nine fu'ms met our criteria for service

HPWSs and responded to our survey, and our

findings are based on the aggregate responses

of these firms.

Demographics

The respondent firms had an average (mean)

of 18,000 employees, with a range of six (e.g.,

a small personal services company) to 300,000

(e.g., a telecommunications giant) employees.

However, while HPWSs may often be initiated

by large firms, it is clear that firms of any size

may be involved in such of such initiatives

(median = 6,000). In terms of area of business,

the firms we surveyed were arrayed in such

diverse markets as insurance, telecommunications,

food processing, consumer goods, power, and

agricultural services, though our emphasis was

on the service units of these businesses.

Impetus for HPWS

One of the issues we were interested in investi-

gating was the factors that led to the implementa-

tion of HPWS in the organizations surveyed. Most

firms reported that the decision was based on a

combination of internal and external stimuli. In

the case of internal stimuli, HPW S was stalled

mostly as a part of an o verall corporate plan often

due to a failure to halt declining levels of opera-

tional effectiveness. However, a sizable number

of firms reported that change in leadership, perhaps

due to less than favorable business results, was

often the major impetus behind implementing an

HPWS.

In the case of extemal stimuli, customers

and new competitors were reported as the major

factors behind the decision.

In terms of specific e xpectations from the

HPWS initiatives, the organizations surveyed listed

improved efficiency and reduced costs as the

primary financial outcomes. In addition, several

operational outcomes were listed as necessary

to achieve the financial outcomes, including

customer success/satisfaction, improved speed,

improved quality, and improved productivity.

Finally, in order to achieve the aforementioned

operational o utcomes, an increase in the levels

of a number of workforce initiatives was cited as

essential. The initiatives listed included empower-

ment, job security, risk-taking, innovation, and

teamwork. Thus, it is clear that human resource

practices were expected to have a major impact

on the operational outcomes of these organizations.

Earlier ttempts to Implement HPWSs

About one-third of the firms surveyed had

made earlier attempts to implement HPWSs, and

in nearly all these cases, the HPWS hiitiative was

tried in the same unit. About thiee-fourths of

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those that had made earlier attempts to implement

an HPWS reported their earlier attempts as

successful. These earlier attempts were reported

to have taken an average of about four yea rs. At

the same time, earlier success did not automati-

cally guarantee success in future attempts to

implement HPWSs. For example, Trinova

Corporation reported tremendous success in the

HPWS initiatives in their Aeroquip Inoac unit

(HRPS.

forthcoming). Hou'ever. future attempts

at similar initiatives in other units have reported

mixed results. This may be attributed to differing

circumstances found in the other units, such as

the people management processes, the culture,

and/or the design of the new initiative.

In connection with previous initiatives, some

of the organizations also reported meeting with

resistance. The source of this resistance was

spread across the organization, though it came

primarily from supervisors and middle-level man-

agers. The present initiatives, too, met with some

resistance from within the organization. Over half

the firms responding to our survey admitted that

they had faced some resistance in their current

efforts. Overall, the level of resistance to the pre-

sent effort was slightly higher than the earlier

attempts. This resistance was typically manifested

through work slowdowns, reluctance to accept

proposed changes, and information filtering. In

terms of the source of resistance, the earlier pattern

was repeated. While the resistance came from all

sources, the bulk of it was concentrated in the

supervisory and middle management cadres. As

such, it is clear that a previous attempt at imple-

menting HPWSs does not make the second effort

any easier.

Design of

n

HPWS

The design of ihe present HPWS initiatives

had several components. Nearly two-thirds of the

firms sui-veyed used some form of external assis-

tance in the design of their HPWSs, mainly in the

form of consultants. However, in most cases, the

external consultants had littie or no role in the

implementation of the HPWS, with their primary

role concentrating on diagnosing the problem,

helping with work design, and conducting training.

In nearly 70 of organizations surveyed, indi-

viduals played specific role(s) of the champion or

sponsor of this initiative. Of these firms, nearly

90 reported that the champion/sponsor was a

member of top management, who took on the role

as part of his or her regular work role, and spent

between 25 and 50 of his or her time on this

initiative.

Twenty-seven of the 39 firms surveyed reported

creating teams as part of the HPWS initiative.

Several teams were created, with nearly half the

organizations surveyed reporting the creation

of more than five teams for this purpose. On the

average, the teams had nine members, and were

comprised of members from various departments

and nearly all levels within the organization,

including top management, staff professionals,

shop-floor employees, middle management,

clerical/support staff and union members. Eighty-

five percent of the firms provided some form of

training for the HPW S initiative, with the m ajority

concentrating on training in w ork design, group

problem solving, meeting management, and

teamwork. The training was typically an ongo-

ing process, with organizations reporting having

provided training at the diagnosis, design,

implementation, and evaluation stages.

A detailed project plan typically p receded the

initiative, prepared for the most pail by a combi-

nation of top management, middle management,

staff professionals, and consultants. In addition,

organizations reported using a variety of tools and

techniques in the implementation of the HPWS

initiative, such as process redesign, total quality

management, communication, team building,

group process, and self-managing teams.

Overall, all 39 organizations reported their

efforts to be successful, with varying degrees of

success. The following sections provide specific

findings of the survey, in terms of the culture

created by the HPWS, the impact on human

resource practices, and the overall impact of

the HPWS initiative on the organization's perfor-

manc e. This is followed by a discussion of the

implications of these fmdings for organizations

that may be considering designing and/or imple-

menting HPWSs.

ulture reated by the HPW S

Exhibit

presents correlations for the individ-

ual culture items w ith two statements measuring

the overall impact of HPWS on financial and

operational performance of the companies. From

this table, it can be seen that a large number of

correlations are significant at the conventional

level (significance level less than .05). In addition,

we can see the magnitude of correlation for each

culture item with both financial and operational

performance. The magnitude of correlation and

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Culture Created

by

the HPWS

Financial

Performance

Practice

Focus on business strategy

Used systems design

Encouraged innovation

MeasureJ internal customer service

Measured external customer service

Promo led cooperation

Changed value system ot 'unil

Resulted in liigh trust levels

Innovation made part of

employee beha vior

Focu.sed leader behavior on employee

and business needs

Resulied in increased delegation

Resulled in higher workplace safety

M ean S.D.

3.89

4.08

3.17

3.59

4.32

3.97

3,78

3.39

3.86

3,38

3.09

0.77

.O8

0.76

1.23

1.28

0.71

0.94

0.87

0.96

0.82

0.89

1.34

.47

.30

,30

, 2

,08

.60

.56

.46

,37

.46

.23

30

S I '

.00

.09

.09

,52

.64

.00

.00

.01

.03

.01

,19

,09

Operational

Performance

R2 *

,11

,41

.29

.51

.39

.42

.60

.63

,61

.58

.46

-37

,51

,02

.09

.00

.02

,01

,00

,00

,00

00

.01

.03

1 Mean ruling and standard deviation by survey respon dents to euch ululetnenl with a scale ranging from I = complete disagree ment to

5 = complete agreement

2 Corre la t ion of agreement ra t ing with

a

statement measuring overall impact of HP W S on the financial performance of ihe organization

3 Statistical Significance

4 Corre la t ion of agreemenl ra t ing with a sta tement mea suring overa l l iinpact of HPW S on the opera tional performance of the organization

Statisrical Significance

EXHIBIT 2

the way the i tem correla tes wi th financial and

operational performance provides useful informa-

tion from a practical perspe ctive. It tel ls us the

relative importance of each of these i tems to both

types of performance.

Based on this criterion, we can see that a num-

ber of organizational cu lture practices a re critical

for both financial and operational performance

(e.g.., cooperation and trust), while some practices

are significantly related to financ ial (e.g., business

strategy) or operational performance

(e.g., increased delegation) but not

to both types of performance. A

closer look at each of these prac-

tices can help explain their potential

role in organizational performance

levels.

Exhibit 2 presents the list of

organizational culture practices that

are deemed cr i t ical for achieving

operational and/or financial success.

Overall , i t is clear that the data

presented here suggest that changing

the culture of the organization can be

an effective way to improve financial

and operational performance. Specifically, a

focus on business strategy seems to have a

strong relationship with financial performance of

the organization, but not with operational per-

formance. This finding confirms the notion that

organizational business plans are typically

geared toward improving the bottom line, but

often fail to be concerned with operational

details: "We need to get from here to there, but

we don't care how."

Effective Organizational Culture Practices

*'' = significant positive re liitionship

i Financial

Practice

business strategy

Used systems design

Measured internal customer service

Measured external customer service

ResuSted in increased delegation

Resulted in higher workplace safety

Promoted cooperation

Changed value system of unit

Resulled in high trusl levels

Innovation made part

of employee behavior

Focused leader behavior on

employee and busine,ss need s

Performance

Operational

Performance

30 HUM AN RESOURCE PLANNING


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On the other hand, using a system design in

the way the work is don e has a strong relation-

ship with the operational performance of the

organization. Given that operational performance

is defined, in part, by the quality and speed at

which work is done, this is an important finding.

Next, emphasis on customer service (both internal

and external) again has a positive effect on the

operational performance of the organization.

Thus, emphasizing the company's commitment

to customer orientation can lead to significant

improvements in the quality of service provided.

Not surprisingly, increased delegation has a

significant positive relationship with operational

outcomes. Once again, this confirms the notion

that employees feel empowered by increased del-

egation, and this empowerment can lead to

signif

icant improvements in the operational outcomes

of the organization. This is an important finding

worthy of attention. The data .suggest that organi-

zations that make a conscious effort to increase

delegation of work are likely to benefit by

improving their operational outcomes. As an

example. Trinova Corporation (HRPS, forth-

coming) allowed employees, in the final assembly

area of their Aeroquip Inoac unit, to make changes

in their work area layout and processes, resulting

in significant improvements in productivity and

quality. Buoyed by the initial success, manage-

ment allowed employees to continue exploring

ways to improve the processes and layout in their

work area. This resulted in several iterations in-

volving significant ch anges, resulting in improved

quality and increased productivity each time.

Thus, it is clear that when employees are given

more responsibility (through increased delegation),

they feel empowered. This feeling of empovv'er-

ment leads them to identify and suggest changes

in the work place (e.g., modifying processes) that

could lead to improved operational performance

(e.g., speed, quality of work, etc.). Exhibit 3

presents a model of the impact of delegation on

operational performance.

The final cultural practice that has a significant

relationship with operational performance (but

not financial performance) is workplace safety,

and our data suggest that improvement in safety

levels can result in improved operations.

The third set of cultural practices have signifi-

cantly strong relationships with both fmancial

and operational outcomes. This m eans that these

practices may help organizations improve both

financial and operational performance. The first

practice listed in this category is the notion of

cooperation. Clearly, an improvement in the

levels of cooperation between all employees will

lead to improvements in the way that work is

done (operational outcomes), but, more important,

this also has a strong impact on financial outcomes.

While the impact of cooperation on fmancial out-

comes may not seem obvious, it should be noted

that these two are highly correlated thus, an

improvement in one is accompanied by an

improvement in the other. A positive change in

the value system of the business unit and higher

trust levels are also associated with positive

changes in both types of organizational perfor-

mance. Similarly, making innovation a normal

part of employee behavior can lead to improve-

ments in financial and operational performance.

Finally, focusing the supervisor's behavior on

business and employee needs can help the organi-

zation grow tremendously. Too often, supervisors

concern themselves too deeply with business

needs, ignoring employee needs. This can have

a negative impact on their performance, which

could negatively impact organizational perfor-

mance. Our fmdings suggest that supervisors

should pay close attention to both business and

employee needs to achieve improved performance

for the organization.

A M odelof theImpactofDelegationonOperational Performance

reel ings of

Ennpowerment

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EXHIBIT 4

P e o p l e M a n a g e m e n t P r o c e ss e s (P M P ) C r e a te d b y t h e H P W S

Practice

Rewarded internal customer service

Rewarded external customer service

Used team-based rewards

Used individually based rewards

Used financia rewards

Used non-fijiancial rewards

Compensated competency growth

Helped inienial/exienial recruitment

Used rigorous seiectioit proce.ss

; Used multiple selection m echanisms

Trained selectors

Supervisors held responsible for

employee development

Rewarded empEoyee learning

Tracked competency growth of employees

Set perfonnance improvement targeis

i.;:for employees

.Agreement

Mean S.D.

3,31 1.13

3.62 1.16

3.29 1.19

2.91 1.24

3.06 1.32

3,29 1.14

2.70 1.36

2.59 1,35

3,12 i,24

3,06 1.34

2.85 ,42

3,09

,25

3.27 1.15

2.19 1,19

3,34 .O8

Financial

Performance

R P

.31

.24

,37

.14

.25

,42

.52

.10

.30

.30

.29

.16

,46

.26

.18

SV

.08

.19

.03

,43

.17

,02

.00

,59

.10

.10

,11

,37

.01

,14

.32

Operational

Performance

^

.54

.45

.49

.19

.28

.51

.63

,33

.52

.51

.42

,00

.59

.37

.27

S25

.00

.01

.00

.28

.11

.00

.00

.06

.00

.00

,02

.99

.00

.03

.12

by survu icniN In each statement wiili a si;:ili; ranging IVum 1= conipleie Mean rating ami sl;indLird ik

5 = completf ugrecnicni

2 Correlation of agreemenl rating w ilh a staienienl measuring overall impact of HPW S on the financial perfonnance of [he organization

3 Stafi.stical Significance

4 Correlation til ugreernent rating wiih a statement m easuring overall impact of H PWS on the operational performance of the organizalion

5 Statistical Significance

uman Resource Practices

Since one of the keys to a successful HPWS

is the optimal and proper utilization of human

resources, we were very interested in investigating

the impact of the HPWS initiative on the people

management processes (HR practices) of the

firms surveyed. Exhibit 4 presents means and

standard deviations for items relating to the people

management processes created by the HP WS . In

addition, like Exhibit I, Exhibit 4 presents corre-

lations for the people management processes cre-

ated by the H PWS with the two items measuring

financial and operational performance.

Survey results in Exhibit 4 indicate that using

team-based and non-financial rewards is closely

related to improved financial and operational

performance. Similarly, compensating employees

for improving their competencies and rewarding

them for learning also leads to improved perfor-

mance on both counts.

On the other hand, rewarding internal and

external customer service can lead to improved

operational performance, though not financial

performance. This mirrors the results found in

connection with organizational culture practices.

Increased attention paid to the selection

process (e.g., m ultiple selectors, training selectors,

etc.) revealed a similar pattern of results. In this

connection, Trinova Corporation (HRPS, forth-

coming) reports adopting a very unique selection

.system whereby prospective employees are hired

through a temporary employment agency for a

60-day trial period in order to better acquaint

themselves with the job requirements. At the end

of this trial period, current employees are allowed

a chance to provide peer reviews to the prospectiv

employee, and problems faced by the employee

or the organization during this period are dis-

cussed openly. The prospective employee is then

allowed another trial period of 30 days, at the end

of which discussions on regular employment are

conducted. Emp loyees who pass the trial period

are offered regular employment, while those who

do not are referred back to the temporary ag ency.

3 2 HUM AN RESOURCE PLANN ING


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It may be a result of this unique system that

absenteeism in this unit is about 1.5% and turn-

over is about 3% , both w ell below the industry

average.

Finally, tracking the competency growth

of employees has a strong relationship with

operational performance but not with financial

perfomiance. This finding merits some discussion.

As organizations track employee competency

growth, the increased attention paid to the

employees could lead to conscious efforts on the

part of employees to grow their comp etencies.

It seems obvious that this improvement in

employee competency would then result in

improved operational performance (Beatty,

imitroff & O'Neill, 1995).

EXHIBIT

Effective Organizational

Culture Practices

= significant positive relaiionship

Practice

Rewarded inicmai

customer service

Rewarded external

customer service

Used rigorous

selection process

Used multiple

selection mechanisms

Trained selectors

Tracked competency

growth of employees

Used team-based

rewards

Used non-financial

rewards

Compensated

competency growth

Rewarded employee

learning

inancial

Performance

perational

Performance

The data presented here suggest that organiza-

tions can improve both financial and operational

performance by revisiting their human resource

practices. Thus, managers and organizations

would do well to pay close attention to HR

practices and the impact they may have on

operational and financial performance. In Exhibit

5,

we present a list of HR practices that seem to

go hand in hand with operational and/or financial

performance.

Overall Impact of HPWSs

An important finding in this survey was the

significant improvement in the competitive advan-

tage position of the organization/unit subsequent

to the implementation of the HPWS. In most cases

the organization was fairly competitive prior to

the HPWS {m = 2.8L s.d. = 0.93): however, this

position improved significantly (m = 4.07, s.d. =

0.70} after the HPWS. Thus, it seems that HPWSs

are primarily initiated by strong firms that are

seeking to become stronger. While it was clear

that organizations participating in our survey

reported that the HPWSs in their organizations

made them stronger and more competitive, we

were interested in identifying specific are as of

the business where the HPWS had a significant

impact. Accordingly, the final section of our sur-

vey (titled Impact of HPW S ) contained ques-

tions on several key areas of business, including

financial and operational performance, job satisfac-

tion, communication processes, and work design.

Exhibit 6 presents the means and standard

deviations for all of these items. In addition, we

also present the intercorrelations among all these

items; this helps to understand the degree to

which these areas go hand in hand. The data

presented report several key fmdings. First and

foremost, firms reported that HPWS had a signifi-

cant impact on the financial performance of the

organization. Thus, as expected, H PW Ss did

successfully impact the bottom line in a positive

direction. In addition, the operational performance

of these organizations was also significantly

infiuenced by the H PW S, in a positive direction.

As such, the quality of work, the speed at which

work is done, productivity, and customer satisfac-

tion also improved significantly.

Next, the HPWS effort caused a positive

culture change in the organization. E mployees

also reported significantly higher levels of job

satisfaction and that communication processes

within the organizations improved markedly.

Finally, the HPWS positively infiuenced the way

work is designed within the organization/unit,

often reflected in the move from a hierarchical

structure to a flatter, m ore ho rizontal, organization.

Further analysis of the data presented in

Exhibit 6 reveals several additional important

fmdings. Job satisfaction, for example, is signifi-

cantly related to both financial and operational

performance and all other processes infiuenced



9/13

O v e r a l l I m p a c t ofH P W S T a b l e of I n t e r c o r r e l a t i o n s

Mean

II

13

14

15

17

18

s.u.

0.97

0.83

1.57

1.42

0.78

0.75

1.20

0.87

1.09

n

--

.39

.02)

.28

.10)

-.10

.56)

.68

.00)

.53

.00)

,53

.00)

.63

(.00)

(.04)

12

.09

.60)

-,04

.84)

.67

-00)

.50

.001

.68

.00)

.56

(.00)

.54

(,00)

13

-

-.46

.01)

.34

-05)

.46

( - 0 1 )

.26

.14)

,07

(,71)

.26

(. 5)

14

-.11

.54)

-.09

.61)

.08

.65)

-.06

.72)

-.05

,78l

15

.63

.00)

.63

.00)

.68

(.00)

,70

.001

16

.57

,00)

.42

( . 01 )

,4 8

(,(K)I

17

--

.45

(-01)

,. 4

(.00)

,58

(.00)

19

3.66

3.94

2.06

2.60

3.67

3.89

3 6 7

3.86

3.91

jf = Infiiienced financial perfonn ance; 12 = Caused cu lture change: IH = Ixil lo increfLse in loliil numb er of emplo yees

14 = Led 10 decrease iii loial number of employees: 15 ==Influenceii o peraiidnal perfomianL-e: 16= inlluenced job saiisdiciioii

17 = Influenced hierurchy/Mnicm n;: 18 = Influenced co mjiiunicalio n proc:esse,s; 19 = tntluencc d wo rk design

N o te : Slaiistica nigniSeance levels aie in parentheses

EXHIBIT 7

The Impact of Employee Job

Satisfaction on Financial and

.

Operational Performance

Performance

Levels

ob Satisfaction

Note: Financial Perfo rmance

O perational Performance

by the H P W S .. except decrease in total number of

employees in the organizations. Regression analy-

ses co nducted to estimate the causal impact of

satisfaction on performance) revealed that job

satisfaction had a significant positive impact on

both financial perfo rmance F = 8.98, p < .01)

and o peratio nal performance F = 8.23, p < .01)

of the organizations. T hus, managers wo uld do

well to identify cultural and H R practices that

might help impro ve emplo yee jo b satisfaction,

since higher levels of job satisfaction could lead

to improved financial and operational performance

for the com pany see E xhibit 7).

W e noted earlier that a reduction in wo rkforce

size has a negative o r insignificant) co rrelation

with all o ther o rganizational processes see Exhibi

6).

T hus, any decrease in the number of employees

with a view to improving organizational perfor-

mance could lead to the opposite effect that is,

a decline in financial and operational performance

T he goo d news here is that a significant increase

or decrease in the number of employees was not

reported by organizations participating in our sur-

vey m = 2.06 and 2.60, respectively). T his is an

important finding given that employees are often

concerned that initiatives such as H P W S s are really

aimed at a reduction in workforce.

34 HUM AN RE5OURCE PLANNING


10/13

on lus ions

This survey was conducted withaviewto

studying

the

effectiveness

of

HPWSs within

organizations.Itwas designedtoanswer some

important q uestions: What kinds

of

o rganizations

are implementing HPWSs? What changesin

organizational culture and human resource prac-

tices occur asapartofthe HPW S process? What

is

the

impact

of

HPWSs

on the

financial

and

operational performanceofthese organizations?

It

is

clear from the above fmdings that HPWSs

arean effective mechanism to change the way

work

is

done within organizations. Specifically

for the service sector, the emphasis on customer

satisfaction and financial/operational success can

be fulfilled by implementing properly designed

initiatives with involvement

and

comm itment

fromallcornersof the organization and/or the

unit

in

which

the

effort

is

implemented. These

data canbeusedbyorganizationsasu guideto

the nuts and bolts

of

designing and implementing

a successful HPWS.

However, some cautionis required before

organizations rushtodesignandimplement

HPWSs. For example, oneof the key questions

often asked is. Wh at human resource pr actices

are essentialfor ahigh performance workplace?

As Gephart {1995) notes, research has not clearly

identified any singleset ofsuch practices.

Organizations have tried

a

number

of

approaches

to create

a

high performance work place, with

varying degrees

of

success. However,

as she

points out, effectively mana ging peopleis akey

to

all

the mech anisms that organizations may

employtoachieve high performance.

On this issue, the data presented here provide

some suggestions. For example, team-based

rewards needtobe implementedtogo handin

hand with the need

for

teams.

It is

also clear from

The ImpactofTeams on

Organizational Performance

Outcomes

Group

e ms

Group

II

No Teoms

Financial

Performance

Operational

Perforroance

Mean

S.D,

3772 ^ 6 ^

.99

M e a n

3750 '

S.D.

3 6 3 .74

our results thatamajorityofthe organizations

believe that teamsdo work andare most oftenan

integral partofthe HPWS process. Asanexam-

ple,

MetP&C HRPS, forthcoming) attributedits

successful implementationofan HP^VSto the fact

thata team was establishedforthis purpose, and

that this team included members frora

all

over the

organizationintermsoffunction andlevel. The

company suggested that the cross-functional

natureof the team allowedforeasier flow of rele-

vant information, while also resultingin abetter

understandingofthe natureofwork doneineach

function/unit, thus creating cohesiveness

and

mutual cooperation.

However, Jiirther analysesofour data revealed

that there were

no

significan t diffeninces

see

Exhibit 8)intermsoffinancial andoperational

success between organizations that bad formed

teams

for

the purpo.se

of

an HPWS, iind those that

had not. This

is

an interesting finding, and worth

some discussion.If having teams takeon the

responsibility

of

implementing the HPWS initiative

does not significantly addto the possibility of

success, are teams really needed

for

this purpose?

Where teamsare formed, membersareoften

required to devote

a

majority

of

their lime toward

the team goal, whichin effect takes them away

from their regular assignments.

In

addition,

for

teamsto besuccessful, team-based leward s need

to be developed and implemented. However, if the

same levelofoutcomes can be achieved without

the formation

of

teams (as our results suggest),

maybe organizations would do welllocritically

examine whether the formation of

te ms

is necessary.

The data further suggest that custcimer service

(both external and internal) needsto berewarded,

and other similar desirable behaviors reinforced

through appropriate m easures. Asanexample,the

secretary

in

the Executive Vice President's office

at Continental General Tire saved ths company

just under $100

by

ordering donuts

lor

one

of

their meetings fromanoutside vendor insteadof

the office cafeteria (HRPS, forthcoming). Clearly,

this

is a

small am ount

for a

company with N orth

American sales

of

over $1 billion. Eiut this

act

of cost savingson thepartof the secretarydid

nol

go

unnoticed; she was cited

for a

reward

and honored appropriately. Company executives

believe rewarding customer service leads

to

a senseofownership, whichinturn re.sultsin

better performance overall.

Note: i-iesis Inr comparison

of

means revealed chat these means

are

not significanllv differeiii from each olher.



11/13

Finally, attention needsto bepaidto thearea

of performance management,

as

this seem s

to

playanimportant rolein thesuccessofth e

HPWS initiative. For exam ple. Popular Products

(HRPS, forthcoming) has establishedacascading

three-step performance m anagement system. The

first stage involves establishing

the

long-term

objectives

of

the company based on

the

strategic

plan. The next step involves devising the current

year's business plan in order to meet the long-

term objectives. Finally,aperformance planis

developed

for

each em ployee,

so it is

clear what

heorshe needstodo during the year to meet the

compan y's objectives. According

to

executives

at

Popular,it isthis link between the com pany's

strategic goals and individual performance goals

that enables employeestounderstand the impact

of their performance

on

the success

or

failure of

the company.

In essence,it isclear thatthebetter thefit

between people and work, information, and tech-

nology, the higher the likelihoodof a successful

HPWS.

Clearly, HPWSs

do

focus

on

the way

the workisdone' through creating flexible work

organizations that adapt the people and the techni-

cal systems to each other, rather than trying tofit

the people to the technical system . As Harrington

(1991) points out, attention in the process is one

of the key ingredients to

a

successful HPWS.

XHI IT

The Impact of Extemal Assistance

on O rganizational Performance

Outcomes

Financial

Performance

Operational

Petfonnance

GroupI

External

Assistance

N = 24

Mean

S D

GroupII

No External

Assistance

_ N_

IS

Mean

S D

3 75 85

3.73

78

3 53 1 13

Note: l-iesLs

for

comparison

of

means revealed ihai ihese means

are not significanily different from eauh other.

Further, HPWSs need to be very focused and

clearly linked

to the

business strategy,

and the

proposed steps need

to be

clearly laid

out.

Lifecycle and other strategic choices need

to

be made prior to the initiation

of

the effort.

Benchmarking may

not be

very essen tial to the

effort, as most successful organizations reported

successfully inventing the proc ess. Further,

extemal assistance does not seem

to be a

major

requirementforthe successofthis initiative.

While many

of

tbe firms surveyed repo rted using

external assistance, there wereno significant

differences

in the

outcomes between firms that

utilized external assistanceand those thatdid

not (see Exhibit

9 .

Training, however,

is a

key ingredient

in

this

process, and all the individuals involved with the

HPWS initiative needtobe provided with ongoing

training. While some

of

the training might

needtobe provided priortoinitiating the effort,

the most successful organizations report ongoing

traininginareas suchasproblem solving,

time/ meeting management, communication,

and process redesign.

O verall,it isclear that token changes willnot

result

in

creation

of

the desired high performance

workplace. Thus,forexample, implementing

a team structure without explicitly establishing

team-based rewards will not resultin ahigh per-

forming workplace. As such, organizations need

to comp letely overhaul the way workisdone in

order to create

a

high performance workp lace,

so

that the results are real and tangible. Further,

as

Huselid (1995) argues, organizations using

a

com

bination

of

high performance work practices will

perform better than those that deal with

it

on

a

piecemeal basis.

If organizations design and implement H PWSs

with our findingsand recommendations inmin

the likelihood

of

creating

a

high performance

workplace would seem to be very high. The bene-

fits

of

HPW Ss are many. O rganizational culture

and value systems can be changedforthe better,

and higher levels

of

cooperation and improved

communication are direct results.Inaddition,

substantial positive improvements

in

fmancial and

operational outcomes can be achieved. H owever,

since the whole process

is

dependent on the com -

mitment and involvementofthe peoplein the

organization, the key is

to

successfully manage

the people within the organization through open

communication and participation.

Finally,

a

note

of

caution: organizations need

to be aware that H PWS initiatives are likely

to

meet with resistance and that this resistance could

come from any level within

the

organization.

But,

as our

survey shows, this resistance

is not

detrimental

to

tbe effort, since

all

organizations

reported high levels

of

success

in

their efforts.

Based

on

our fmdings,

it is

suggested that clear

communication and high employee involvement

may reduce the resistance substantially and lead

to

a

successful HPWS.

6 HUM AN RESOURCE PLANN ING


12/13

Biographical Sketches

Arup Varma Ph.D. (RutgersUniversity- 1996)

isAssociateProfessorat the Institute of Human

Resourcesand IndustrialRelationsat Loyola

University-Chicago. Hisresearch interests include

the examination of cognitiveprocessesin perfor-

mance appraisals, leader-member exchange, the

treatmento findividualswith disabilities in the

workplace, and high perfommn ce work systems.

Hisresearchha sbeen publishedinleading journals

including Personnel Psychology, Journal of Applied

Psychology, Human Resource Management

Review, and Human Resource Planning.He

has also consulted with several organizations

on strategic andorganizationdevelopment issues.

Prior to returning to graduate school for his

doctorate, h e worked for two of India's leading

corporations in the human resourcefield.

Richard W. Beatty Ph.D^is a Core Faculty

mem ber at theUniversityof Michigan's Executive

Education

Center.

He serves as faculty m ember

and course developer for thecertificationprogram

ofthe American Compensation

Association.

As a

nuuiagementconsultant, he has worke d with well

over half of the Fortune 100 firms. H is specialty

is working withorganizations to design and imple-

ment strategic change

initiatives.

D r. Beatty h as

authored (orcoauthored more than 120 articles

and papers andwrittenand edited several books.

He is an Associate Editoro/ Human Resource

Management

and has served on the editorial

boards ofthe Academy of Management Journal,

Human Resource Planning, and The Journal of

High Technology Management.

Craig E. Schneier Ph.D .

heads his own manage-

mentconsultingfirm in Princeton, NJ. The firm

specializes in assistingorganizationsexecute.strat-

egy and change

culture,

as well as enhance the

effectiveness of the HR systems. Dr.S chneier has

heldconsultingpositions with Ernst and

Young,

Booz'Allen, ODI, and Sibson. He has been on the

faculty of theUniversityof

Maryland,

Universityo f

Colorado, and Columbia University.Dr. Schneier

has been co-author or co-editor of over 100

articles and several books, including Managing

Strategic and Cultural Change.

He has consulted

with over half of the Fortune 100 com panies.

David O. Ulrich Ph.D. isProfessorof Business

Administration and Co-Director of Human

ResourceProgram s at theUniversityof Michigan.

He is also editor of the Human Resource

Management Journal, and has published more

than 50 publications on strategy implementation.

organizational theory, competitiveness , leader-

ship, and human resources. He is coauthor of

Organizational Capability: Competing From the

Inside Out, The Boundaryless Organizafion.

and his most recent book isHuman FLesource

Champions. He has continued interest in Inte-

grating academic research and organizational

practice, and has done research for and consulted

with over half oftheFortune 200.

eferen es

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Jossey-Bass, San

Francisco. CA: 323-342.

Beatiy. R.W.. Schneier. C.E.. and Ulrich. D.O. Annoiated

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a study on hpws

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